The Securities and Exchange Board of India (SEBI) issued a circular requiring depositories to strengthen the creation and invocation of pledges of securities through the depository system, by inserting additional requirements into the SEBI Master Circular for Depositories. The updates are intended to align the depository pledge framework with the notice and other obligations set out in Sections 176 and 177 of the Indian Contract Act, 1872. Depositories’ Pledge Request Forms must include undertakings that the pledgee will provide reasonable notice to the pledger and comply with Sections 176 and 177, and that both pledger and pledgee will comply with applicable provisions of the Indian Contract Act, the Depositories Act, SEBI regulations, circulars and bye-laws. Depositories must maintain a standardized Pledge Request Form format and, when a pledge is invoked, send an intimation to both parties confirming invocation and that the pledgee has been recorded as “beneficial owner” under Regulation 79(8) of the SEBI (Depositories and Participants) Regulations, 2018. Depositories are also directed to amend relevant bye-laws and rules, make any required system changes, and notify participants and publish the provisions on their websites. The circular must be implemented on or before 6 April 2026.

Original source View in tracker